Air New Zealand is keen to buy a bigger stake in Virgin Australia in a move that is expected to spur Eitihad and Singapore Airlines to consider bolstering their holdings in the Australian airline.
In another shake-up of Virgin's share register, the government-controlled Air New Zealand has raised its stake to 23 per cent in Virgin Australia. It bought a 3 per cent stake in Virgin for about $72 million and is seeking approval to raise it by a further 3 per cent under so-called creep provisions.
The purchase makes Air New Zealand the largest shareholder, followed by Singapore Airlines at 20 per cent and Richard Branson's Virgin Group at 13 per cent. Sir Richard has made it clear he plans to reduce his stake further.
Etihad is also believed to have applied to the Foreign Investment Review Board (FIRB) to raise its holding in Virgin from 10 per cent to 20 per cent.
Air New Zealand has reiterated that it does not intend to seek a board seat, nor is it interested in launching a takeover bid. Any push for a board seat would spark a race among the three airlines for representation.
While Singapore Airlines has said it is not interested in using creep provisions to raise its stake, the latest move by Air New Zealand may make it reconsider its position.
Macquarie analysts said there was no need for Virgin to remain listed on the stock exchange in the long term if the cornerstone shareholders were to "formulate a comprehensive agreement" to own it.
Virgin has alliances on various routes with each of its airline investors.
Air New Zealand will need approval from the FIRB and the competition regulator to creep further up Virgin's share register to 26 per cent.
The latest development follows the deal by a company founded by billionaire Stanley Ho to buy a third of Jetstar Hong Kong, which will result in the shareholdings in the budget airline of Qantas and China Eastern falling to 33 per cent each.
Qantas hopes the emergence of a local investor on the register will improve the chances of Jetstar Hong Kong gaining regulatory approval to launch flights.
The launch date has already been delayed from this month to the end of the year, and could be pushed back further because of a review of airline policy by Hong Kong's transport bureau.
Macquarie said it was better for Qantas to share the risks and rewards of Jetstar Hong Kong with a local partner.
"Losing a third of the longer-term profitability is a greater outcome than not seeing the project get approved at all ... which was a real possibility," they said.